A Practitioners Perspective The Need to Rethink Contracting

A Practitioner’s Perspective: The Need to Rethink Contracting Strategies 20 June 2019 Hal Bretan Chief Counsel British Telecommunications in the Americas 1 © British Telecommunications plc 2018

Redefining the contract negotiations process Agenda: • The current landscape of B-to-B contract drafting and negotiations • Economic drivers of the buyer-seller contracting process • What is in the best long-term interests of business clients? • How do we change the state-of-the-art? • A call for change across industries, geographies 2 © British Telecommunications plc 2018

The current landscape of B-to-B contract drafting and negotiations - Lawyers drafting terms and conditions that most favour their clients - A starting position of I need to win and the other side has to lose in order for this deal to work out well for me - Significant time and resources expended in the negotiations process – Legal, Procurement, Sales, Operations, Tax, Risk Management, Security, Finance - Where there is generally equal bargaining power, the final outcome for numerous clauses is fairly predictable and balanced - General lack of awareness of the impacts of lengthy negotiations and unbalanced terms - General reluctance to tell lawyers how to draft or negotiate boilerplate terms 3 © British Telecommunications plc 2018

Speed to Contract (S 2 C) – Business Imperatives - Faster rollouts of solutions to business problems - Faster achievement of competitive advantages - Faster realizations of savings by buyers - Faster revenue streams by suppliers - Fewer resources in relevant departments – doing more with less; need to move on quickly to other transactions - Need to shift focus to the more critical elements of transactions – technical elements of the solution, commercials (price structure), delivery timeframes 4 © British Telecommunications plc 2018

The economics of sub-optimal relationships - Unfair terms have broader impacts beyond just S 2 C - Harsh customer terms discourage suppliers from offering goods and services, thereby reducing competition for that business - Harsh customer terms force suppliers to accept higher risks, pressuring prices higher - Harsh supplier terms encourage “Do It Yourself”, shrinking the marketplace and driving up costs - Harsh terms by either party cause reputational impacts in the market, reducing the number of companies willing to trade with it 5 © British Telecommunications plc 2018

What is in the best interests of clients? - Fostering long term relationships, with both parties receiving fair value - Creating a collaborative – and not combative - environment between the parties - Protecting their interests in case of catastrophic breaches, but not at the expense of more probable life cycle events - Not letting contract negotiations undermine the optimism that starts every relationship - Speed, speed 6 © British Telecommunications plc 2018

Changing how we negotiate contracts - Focus on business issues, not legal issues – In the long run, the Schedules will be far more important than the body of the agreement - Focus on how to fix problems efficiently, not how to punish for them - Setting priorities on what to negotiate – viewing risks in a different way - Changes in what we perceive as reasonable - For the S 2 C concept to achieve maximum benefits, both sides need to adopt the philosophy - Signals must be given by both sides from the outset that balanced terms – and principles-based contracting - will be a common objective 7 © British Telecommunications plc 2018

IACCM Contracting Principles - Endorsed by the International Association of Contract and Commercial Management - Balanced contracting Principles for both buyers and sellers, reviewed by panels of over 300 members across industries, geographies and disciplines - Now up to 11 Principles: - - 8 Liability Caps and Exclusions from Liability Data Security and Privacy Indemnifications of Third Party Claims (Excluding Intellectual Property Claims Intellectual Property Rights and Indemnification for Third Party IP Claims Customer Audits of Suppliers SLA Remedies Compliance with Laws Force Majeure Safeguarding Confidential Information Suspension Rights Termination Assistance Companies being asked to publicly adopt Principles and reflect them in their contracts and in their negotiations © British Telecommunications plc 2018

A Call for Action - Widespread acknowledgment of the value of balanced terms and S 2 C – understanding of the economic drivers - Corporations need to set the market tone - Top down and bottom up support – executives and relevant organizations - Law firms, consultants, including those that manage RFPs - Academia, industry associations - Shift from What’s in it for Me to What’s in it for We 9 © British Telecommunications plc 2018

Hal Bretan hal. bretan@bt. com +1 646 932 1682